Sectoral Balance Sheet

This is a snapshot of the model's economy, showing the assets, liabilities, and net worth (equity) of each sector. The fundamental principle is that for every transaction, there is a use of funds (a minus sign, -) and a corresponding source of funds (a plus sign, +). For the system as a whole, every transaction must sum to zero, ensuring no money is created or destroyed unaccountably.

Table Descriptors

• Rows: Each row represents a specific financial instrument (an asset, liability, or net worth).
• Columns: Each column represents a core agent (or sector) in the model's economy.
• + (Asset): The sector in this column holds this instrument as an asset.
• - (Liability / Equity): The sector in this column owes this instrument (a liability) or this is its net worth (equity).

Instrument / Sector	Households	Firms	Private Bank	Fund Manager	Central Bank	Government	Total
1. Reserves (CB)			+A: R		-L: R		0
2. Cash (Physical)	+A: C	+A: C_f			-L: C_total		0
3. Deposits (Bank)	+A: D_h	+A: D_f	-L: D_total	+A: D_fm		+A: D_g	0
4. Household Loans	-L: L_h		+A: L_h				0
5. Working Capital Loans		-L: L_f	+A: L_f				0
6. Dividend Payment Loan (Private Natural Monopoly Firms)		-L: L_f	+A: L_f				0
7. Government Debt			+A: B_b	+A: B_fm	+A: B_cb	-L: B_total	0
8. Equity Shares		-E_all	+A: S_b	+A: S_fm			0
9. Fund Units	+A: U			-L: U			0
Net Worth (Equity)	-E_h	-E_f	-E_b	-E_fm	-E_cb	+E_total	0
Total	0	0	0	0	0	0	0

Explanations of Financial Instrument (Rows)

1. Reserves (CB)
   1. Definition: The "high-powered" money that the Private Bank holds in its own account at the Central Bank.
   2. Holders: This is an asset (+A: R) for the Private Bank.
   3. Issuer: It is the corresponding liability (-L: R) of the Central Bank.
2. Cash (Physical)
   1. Definition: The physical banknotes and coins in the economy.
   2. Holders: Physical cash is an asset for the non-financial private sector: Households (+A: C) and Firms (+A: C_f).
   3. Issuer: All physical cash is a liability (-L: C_total) of the Central Bank.
3. Deposits (Bank)
   1. Definition: The electronic money held by agents in their commercial bank accounts.
   2. Holders: Bank deposits are the primary liquid asset for Households (+A: D_h), Firms (+A: D_f), the Fund Manager (+A: D_fm) (for its client custody accounts), and the Government (+A: D_g).
   3. Issuer: All deposits are a liability (-L: D_total) of the Private Bank.
4. Household Loans
   1. Definition: Personal loans, such as for consumption smoothing or speculation, taken out by households.
   2. Holder: This is an asset (+A: L_h) for the Private Bank.
   3. Issuer: This is a liability (-L: L_h) for Households.
5. Working Capital Loans
   1. Definition: The revolving lines of credit that firms may use to finance their payroll.
   2. Holder: This is an asset (+A: L_f) for the Private Bank.
   3. Issuer: This is a liability (-L: L_f) for Firms.
6. Dividend Payment Loans
   1. Definition: The revolving lines of credit that firms, previously state-run enterprises, may use to finance their leveraged dividend payments.
   2. Holder: This is an asset (+A: L_f) for the Private Bank.
   3. Issuer: This is a liability (-L: L_f) for Firms.
7. Government Debt
   1. Definition: The stock of all outstanding government bonds and T-bills.
   2. Holders: This debt is held as an asset by the Private Bank (+A: B_b), the Fund Manager (+A: B_fm), and the Central Bank (+A: B_cb).
   3. Issuer: This is the primary liability (-L: B_total) of the Government.
8. Equity Shares
   1. Definition: The ownership claims on the future profits of public firms.
   2. Holders: These shares are held as assets by the Fund Manager (+A: S_fm) (on behalf of households) and the Private Bank (+A: S_b) (as part of its market-making inventory).
   3. Issuer: The shares are a liability (-E_all) of the Firms themselves, representing their retained earnings or book value.
9. Fund Units
   1. Definition: A "wrapper" security. These are the shares in the Fund Manager's investment funds that households own.
   2. Holder: These units are the primary investment asset (+A: U) of Households.
   3. Issuer: The units are a liability (-L: U) of the Fund Manager, representing the total claim that households have on the fund's portfolio.

Net Worth (Equity)

• Definition: The balancing item for each sector (Assets - Liabilities).
• Holders: Net worth is a liability/equity for all private agents: households (-E_h), firms (-E_f), the private bank (-E_b), the fund manager (-E_fm), and the central bank (-E_cb).
• Issuer: The Government's balance sheet is the mirror image of the entire system. Its net position (+E_total) is precisely equal to the sum of all other agents' net worth. This is the fundamental accounting identity of the model: Public Sector Debt == Private Sector Wealth.